Metal Management Inc agreed to be acquired by Australia's Sims Group Ltd for $US1.6 billion ($A1.85 billion) in stock, creating the largest global scrap metal company as consolidation in the industry gathers pace.
"This (deal) is not terribly surprising since the scrap industry has been consolidating for some time and that's been in response to the steel industry's own consolidation," analyst Eric Glover of Canaccord Adams said by phone.
A sharp rise in iron ore prices and increased demand from rapidly growing economies such as China, and limited supply of scrap that is also used to make steel, have made ferrous scrap an attractive commodity, Canaccord Adams said in a note to clients.
Metal Management's presence across the US complements Sims' export-focused North American business.
The transaction is valued at about $US1.6 billion, Andrew Siegel, a spokesperson for Metal Management, said by phone.
Metal Management shareholders will get 2.05 Sims American Depositary Receipts for each Metal Management share held.
Sims Group's offer is pitched at a premium of 18.2 per cent to the scrap metal recycler's closing share price on Friday on the New York Stock Exchange.
The transaction has a mutual termination fee of $US25 million ($A29 million) and the company expects to close the deal in the first quarter next year.
The combined group, to be called Sims Metal Management, will be led by Metal Managements' current Chief Executive Daniel Dienst and Finance Chief Robert Larry who will retain their positions.
Sims Metal Management will be the largest listed recycler with a market capitalisation of about $US5 billion ($A5.8 billion).
Upon closing, Sims shareholders will own about 70 per cent of the combined company.
Metal Management shares, which were halted Monday, had closed at $US48.86 Friday on the New York Stock Exchange. The stock was up 29 per cent so far this year.